Six Ways to Manage Cash Flow as a Seasonal Business Owner

Do you operate a seasonal business? If your revenue peaks and declines depending on the time of year, or you only operate your business during a certain season—then you can be considered a seasonal a business owner.

If this is you, then you know that monitoring and managing your cash flow and revenues through these fluctuations is essential. Below are six ways you can better plan and manage for the ebb and flow of seasonal business cash flow.

Make a Budget that Includes Cash Flow Projection

Every business operates off a set budget, but if you operate a seasonal business it’s important to include a cash flow projection template as part of your financial planning process. This will help alleviate the guesswork involved in predicting your income and outgoings over the year, and inform you of the best ways to conserve cash flow throughout the year.

If you can, plan your cash flow over a year.  Use historical reports from previous years to forecast your revenue, your busiest months, and your estimated sales for each month. You’ll also need to consider your fixed expenses (rent, utilities, etc.) and your variable expenses (salaries, inventory, taxes, etc.) as well as when these variable expenses will hit.

Now that you have a view of your revenues and outgoings you can develop strategies to manage cash flow throughout the year.

Steam Roll Your Invoicing

One way of expediting the flow of cash as you head into your quiet season is to modify your invoicing policies. If you can, try to secure a percentage payment upfront. This will also help you deal with slow paying customers.

Negotiate Flexible Payment Terms from Your Suppliers

Just as you want to expedite the flow of cash in, you should also consider negotiating extended payment terms from your suppliers. This is especially useful as you head into your busy season and incur most of your variable expenses (inventory, marketing, etc.). The trouble is you won’t see any immediate returns on those investments until your revenues kick in, so an extended payment plan can help ease the pain of these pre-season costs.

Find Alternative Sources of Income

Earning income from alternative sources or diversifying your products or services to include ones that will be popular during your off-season is a great way of keeping cash flowing and your business top of mind. Don’t forget to check whether you need any additional business licenses or permits to do this,’s “Permit Me” tool can help you find the paperwork that you might need.

Consider a Short-Term Loan or Line of Credit

Government-backed small business loans are a useful option if your cash flow projections show potential tight spots in your calendar. One option to consider is the Small Business Administration (SBA) CAPLine Loans umbrella program which helps small businesses meet their short-term and cyclical working-capital needs. Part of the CAPLine program is the Seasonal Line short-term working capital loan program which provides advances against anticipated inventory and accounts receivable to help businesses with seasonal sales fluctuations.

Another option is a revolving line of credit (RLC). An RLC is a flexible method of borrowing cash for your seasonal small business needs. It is very similar to a credit card in the sense that an RLC has an established credit limit that you can borrow up to, only without a plastic card.

Use Your Downtime for Planning

Use your off-season wisely. Regroup, review, and plan ahead to ensure a profitable busy season. How did your business perform against its plans? Did your marketing campaigns pan out as well as you’d hoped? What new products and services can you introduce in the new season? What’s the competition up to? How can you position yourself against them?

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed.

Can I convert part of an active SEP to a Roth IRA?

Q: I have an active SEP (Simplified Employee Pension) IRA. I’ve been hearing about the positives involved with Roth IRAs and would like to take advantage of the tax-free savings as soon as possible. Can I convert part of it to a Roth IRA right now?
A: As long as the SEP agreement allows you access to the funds (and most SEPs will allow you access), you can do a conversion from the SEP account to a Roth IRA. If you will be receiving future SEP contributions in the account, make sure that you leave enough money in the account to keep it active. Enjoy the benefits of a Roth IRA and make sure you have enough outside money to pay the tax on the conversion.

IRS Wrongly Demanded Repayments of First-Time Homebuyer Tax Credit

The Internal Revenue Service mistakenly sent notices to approximately 80,000 taxpayers telling them they needed to repay the First-Time Homebuyer Tax Credit.

A new report by the Treasury Inspector General for Tax Administration found that 27,728 taxpayers were notified they had a repayment obligation even though they had purchased their homes in 2009, when there was no repayment obligation. In addition, the information provided by a vendor hired by the IRS to use third-party data to identify individuals who may have disposed of their principal residences was unreliable, resulting in 53,558 individuals who incorrectly received notices to repay the Homebuyer Credit.

The First-Time Homebuyer Tax Credit was a program aimed at stimulating the housing industry. While it helped prop up the industry, especially in the wake of the mortgage crisis, the quick ramp-up and shifting requirements left the IRS issuing the tax credits to thousands of taxpayers who did not fit the qualifications, including minors. The IRS was then forced to demand repayments of the tax credits that had been issued incorrectly, as well as from homeowners who fit into the various recapture provisions if they didn’t hold onto their homes long enough.

The TIGTA report found that the IRS is having difficulty determining which taxpayers have to repay the First-Time Homebuyer Credit. The report acknowledged that the IRS accurately issued the vast majority of the notices, over 5.2 million, informing taxpayers of the need to repay the credit.

However, at the same time, the IRS did not send notices or sent incorrect notices to 61,427 households due to programming errors or incorrect information on the tax accounts. Of those 61,427 households, 12,495 individuals were notified that they did not have to repay the Homebuyer Credit, when in fact they did have a repayment obligation; 27,728 taxpayers were notified that they had a repayment obligation despite having purchased their home in 2009 (only 2008 purchases have a repayment obligation); 2,152 individuals who bought their house in 2008 were incorrectly notified that they did not have a repayment obligation unless they sold their house; 18,220 did not receive a notice reminding them of their repayment requirement; and 832 deceased individuals may have been sent an incorrect notice regarding repayment.

“The IRS processed the vast majority of Homebuyer Credit Claims accurately,” said TIGTA Inspector General J. Russell George in a statement. “However, IRS officials still need to eliminate the programming errors that resulted in thousands of taxpayers being misinformed about their repayment status.”

The Homebuyer Credit was created by Congress in 2008 to help stimulate the housing industry by encouraging people to purchase their first homes. Subsequent legislation in 2009 and 2010 revised, extended and expanded the Homebuyer Credit in an attempt to help boost a sluggish real estate market. The Homebuyer Credit was a refundable credit that could result in a tax refund when the credit exceeded the tax liability, even if no income tax was withheld or paid.

Each of the laws with Homebuyer Credit provisions contained different credit amounts, qualification requirements and repayment requirements. Individuals who received the Homebuyer Credit for a home purchased in 2008 are required to pay back the total amount received for the Homebuyer Credit over 15 years beginning in 2010. There are some exceptions. In addition, individuals who received the Homebuyer Credit in 2008, 2009 or 2010 generally must repay the entire amount they received, if, during the three-year period beginning on the purchase date and after the year for which the individual received the homebuyer credit, they dispose of the home or it ceases to be their principal residence. If the disposition is a sale, the repayment requirement is applicable to the extent there is a gain on the sale of the home.

“The scope of the FTHBC was unprecedented in that it required the development of a comprehensive and balanced strategy to administer the credit amid the many unique situations that could trigger the recapture provisions, and to provide information to affected taxpayers to assist them in complying with their tax reporting obligations,” wrote IRS Wage and Investment Division Commissioner Richard C. Byrd Jr. in response to the report.

TIGTA recommended that the IRS ensure that Homebuyer Credit repayment notices are accurately issued; correct erroneous purchase dates on tax accounts; and discontinue using third-party vendor data to identify individuals who may have disposed of their principal residents unless the reliability can be significantly improved.

The IRS agreed with two of TIGTA’s recommendations. For the remaining recommendation relating to accurately issuing notices, the IRS indicated it is replacing some of its notices with an online tool for taxpayers to obtain their Homebuyer Credit repayment status. It plans to make the Web-based tool available to taxpayers for the 2012 filing season.

Michael Cohn, Accounting Today